It's Becoming Clear That A Country's Ability To Fight Ebola Is Related To The Size Of Its Economy

Ondraya Frick from U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) train U.S. Army soldiers from the 101st Airborne Division (Air Assault), who are earmarked for the fight against Ebola, before their deployment to West Africa, at Fort Campbell, Kentucky. REUTERS/Harrison McClary It is becoming clear that overcoming the challenges in the fight against Ebola is related to the size of an economy. The very poor countries face the greatest difficulty.

The African countries hit hardest by Ebola this year are Sierra Leone, Guinea, and Liberia. Those three African countries are poor. Their combined output estimated in gross domestic product (GDP) numbers is small. They have the bulk of the Ebola cases, about 9000 cases combined this year. Half of those infected have died (World Health Organization). See: http://www.cdc.gov/vhf/ebola/outbreaks/2014-west-africa/case-counts.html .

There are a few cases in neighboring countries. Senegal has one case and zero deaths. Nigeria has had 20 cases, eight deaths. Those countries each have greater GDP relative to the combined three poorer ones. There are isolated cases like those in the US (three cases, one death) and Europe (one case in Spain, no death).

It seems to us that as long as Ebola remains transmissible in its current form (contact with the bodily fluids of an infected and symptomatic person), countries with larger GDP will have a smaller Ebola threat because they have the means to address it effectively.

Let's put the three most heavily infected African countries in economic perspective. Vermont currently has the smallest state GDP of the 50 United States. Yet its GDP is more than double the combined GDPs of the three African countries with the bulk of Ebola cases and deaths. The US and European Union each account for about one-fourth of the world's $75 trillion GDP. The three African countries, meanwhile, have a GDP of one-eighth of Puerto Rico's. Other than the islands of Malta, with a GDP of about $10 billion, the GDP of the three African countries combined is smaller than that of any member of the Eurozone. The GDP of Cypress is about one and a half times as large.

When the television is turned on, the viewer sees that Ebola is a deadly disease. However, the resources to contain and treat Ebola clearly exist in relation to the size of the economies where the disease occurs and spreads. In the modern interdependent world, where economies are more and more integrated, resources determine how little or how much damage is done.

We think the financial markets over-discounted the Ebola threat as an emotional reaction to the media news flow. This is an assumption that will remain valid as long as the current transmission mechanism remains unchanged.

Cumberland Advisors is moving beyond the Ebola scare when it comes to strategies for portfolio management. Cash reserves have been reduced and deployed. This is a change in strategy; we have raised the allocation to the US stock market. Last week's market riot provided an entry point.